1 Flashcards
What is an advantage of Owner’s Capital?
Full control over business decisions
Owner’s Capital allows the owner to make all strategic decisions without external interference.
What is a disadvantage of Owner’s Capital?
Limited funds may restrict growth
Owner’s Capital can lead to financial constraints that hinder business expansion.
What is another disadvantage of Owner’s Capital?
Personal financial risk if the business fails
The owner’s personal finances are directly at risk with Owner’s Capital.
What is an advantage of Loans?
Access to larger amounts of capital
Loans can provide significant funding that may not be available through Owner’s Capital.
What is a key feature of Loans?
Fixed repayment schedule allows for budgeting
Loans typically have a structured repayment plan, aiding financial planning.
What is a disadvantage of Loans?
Interest costs can add up over time
The total cost of borrowing can be substantial due to interest payments.
What is another disadvantage of Loans?
Obligation to repay regardless of business success
Borrowers must fulfill their repayment obligations even if the business does not perform well.
What is a key advantage of crowd-funding?
Access to diverse funding sources
Crowd-funding allows entrepreneurs to tap into a wide array of potential investors.
How does crowd-funding validate a business idea?
Through public interest
A successful crowd-funding campaign indicates that there is demand for the product or service.
What is a disadvantage of crowd-funding?
Requires significant marketing efforts to attract backers
Extensive marketing is necessary to create awareness and interest in the campaign.
What happens if a crowd-funding campaign does not reach its funding goal?
Leaving you without capital
Failing to meet the target means that funds are not collected, which can hinder business development.
What is a key advantage of mortgages?
Allows for property acquisition without full upfront payment
Mortgages enable individuals to buy homes or properties without needing the total amount in cash.
What potential benefit can arise from property acquired through a mortgage?
Potential for property value appreciation
Over time, the value of real estate can increase, benefiting the property owner.
What is a disadvantage of obtaining a mortgage?
Long-term financial commitment
Mortgages typically require years of repayment, which can affect financial flexibility.
What risk is associated with missing mortgage payments?
Risk of foreclosure
Failure to keep up with payments can lead to losing the property to the lender.
What is one advantage of mortgages?
Allows for property acquisition without full upfront payment
This means individuals can buy property without needing the entire purchase price upfront.
What is another advantage of mortgages?
Potential for property value appreciation
This refers to the increase in the market value of the property over time.
What is a disadvantage of mortgages?
Long-term financial commitment
Mortgages typically require payments over many years, impacting financial flexibility.
What is another disadvantage of mortgages?
Risk of foreclosure if payments are missed
Foreclosure occurs when the lender takes possession of the property due to non-payment.
What is one advantage of venture capital?
Large capital investment for growth
Venture capital can provide significant funds needed for startups and expanding businesses.
What is another advantage of venture capital?
Access to investor expertise and networks
Investors often bring valuable knowledge and connections that can benefit the business.
What is a disadvantage of venture capital?
Loss of some control over business decisions
Investors may require input or control to protect their investment.
What is another disadvantage of venture capital?
Pressure to achieve high returns quickly
Venture capitalists typically expect rapid growth and returns, which can create stress for entrepreneurs.
What is one advantage of debt factoring?
Immediate cash flow from unpaid invoices.
Debt factoring provides businesses with quick access to cash by selling their invoices to a third party.
What is another advantage of debt factoring?
Outsourced collection efforts reduce administrative burden.
This allows businesses to focus on their core operations without worrying about collecting unpaid invoices.
What is a disadvantage of debt factoring?
Fees can be high, reducing overall profit.
The cost of factoring can eat into the profits that a business would otherwise make from its sales.
What is another disadvantage of debt factoring?
May affect customer relationships if not managed well.
Poor handling of collections can lead to dissatisfaction among customers.
What is one advantage of hire purchase?
Use of the asset while paying over time.
Businesses can benefit from using an asset immediately while spreading the payment over a period.
What is another advantage of hire purchase?
Fixed payments make budgeting easier.
Knowing the exact payment amount helps businesses plan their finances more effectively.
What is a disadvantage of hire purchase?
Total cost is usually higher than outright purchase.
The convenience of spreading payments comes at a higher overall cost.
What is another disadvantage of hire purchase?
Ownership only transfers after all payments are made.
Until the final payment is made, the buyer does not own the asset.
